CoramThe Honourable Mrs v. The Commissioner of Income-tax

In the High Court of Judicature at MadrasDated: 10.08.2012CoramThe Honourable Mrs.JUSTICE CHITRA VENKATARAMANandThe Honourable Mr.JUSTICE K.RAVICHANDRABAABUTax Case No.110 of 2006Shri.R.Dharmichand Kothari11, North Car Street,Chidambaram – 608 001..... PetitionerVs.The Commissioner of Income-tax,Tamil Nadu – V, Chennai – 600 034..... RespondentREFERENCE Application under Section 256(1) of the Income-Tax Act, 1961 in I.T.A.No.1755/Mds/1996 for the blockassessment years 1986-87 to 1996-97 on the file of theAssistant Commissioner of Income Tax Circle I(1) Pondicherrydated 30.7.96 and made in PAN/GIR 710 D and on the file of theCommissioner of Income Tax Tamil Nadu V Chennai 34 dated28.8.2005 in RA No.110 (MdS)/98 (in ITA No.1755/(Mds)/96)For Petitioner : Mr.Quadir HoseynFor Respondent: Mr.Arun Kurien Joseph Standing Counsel for Income-Tax--------O R D E R(Order of the Court was made by CHITRA VENKATARAMAN,J.)Following are the questions of law referred to this Courtunder Section 256(1) of the Income Tax Act: "1. Whether on the facts and in the circumstancesof the case, the Tribunal was right in holding thatthe addition of Rs.43,06,458/- warranted asunexplained investment in Gold even though no primarygold was found?2. Whether on the facts and in the circumstancesof the case, the Tribunal was justified in coming to aconclusion that the applicant has made investment inGold at any point of time, especially when there wereno material or proof to show that such investment wasmade?3. Whether on the facts and in the circumstancesof the case and having regard to the provisions ofSection 132(4A), whether the Tribunal was justified in https://hcservices.ecourts.gov.in/hcservices/ holding that there was no nexus or proximity betweenthe alleged acquisition of primary gold and theinvestment in Gold Bond Scheme?4. Whether on the facts and in the circumstancesof the case, the Tribunal was justified in theassuming that the dates mentioned in the CustomsReceipts were the dates of purchase of gold withoutany material?5. Whether on the facts and in the circumstancesof the case, the Tribunal was justified in holdingthat the addition of Rs.6,20,000/- as creditsunexplained was warranted especially no such creditappear in the books of the applicant?"2. Learned counsel appearing for the assessee submits thatthe assessee is not pressing the fifth question of law. He hasalso made an endorsement to that effect.3. It is seen from the narration of facts that there wasa search in the assessee's premises on 12.7.1995. The searchrevealed unaccounted jewellery weighing 3007 grams. Apart fromthat, the search party also found bogus credits in the names ofShri.Kapoorchand and Smt.Kiran to an extent of Rs.6,20,000/-;unaccounted investment in shares to an extent of Rs.2.00 lakhs;customs receipt for Rs.50,000/- for delivery of 100 kg ofsilver and unaccounted investment in gold, which was evidencedby the receipt in the names of Mohammed Mustafa forRs.1,07,932/- and Abu Tahir for Rs.1,09,005/- evidencingpayment of customs duty on 04.06.1992 and 12.06.1992 for importof gold weighing approximately 4,906 grams and 4,897 grams,totalling 9,803 grams. 4. As regards the bogus credits in the names ofShri.Kapoorchand and Smt.Kiran, wife of Kapoorchand, at thetime of enquiry, the said Kapoorchand admitted that the moneyadvanced by him in his name and his wife's name actuallybelonged to the assessee. Subsequently, the said Kapoorchandretracted the statement given earlier. The Assessing Officerpointed out that the said Kapoorchand was not having any assetworth mentioning and he was running his livelihood from thesalary earned every month. The Assessing Officer furtherpointed out that the assessee had deposed that the balanceavailable in the account of Shri.Kapoorchand and Smt.Krianactually belonged to the assessee and he was prepared to offerthe same for assessment. It is further found that money hadbeen deposited by cash in the name of Shri.Kapoorchand andSmt.Kiran, a day earlier to the date of cheque issued. Thusthe Assessing Officer pointed out to the statement given by theassessee that at the time of search before the search party,the assessee pointed out that money brought in by Kapoorchandand his wife were monies given by the assessee from theirunaccounted income. He had filed returns of both these personsand this was done only to accommodate the credits. Thus theAssessing Officer made an addition of Rs.6,20,000/-. Aggrievedby this addition, the assessee filed an appeal before the https://hcservices.ecourts.gov.in/hcservices/ Tribunal, which confirmed the addition. Since the assessee isnot pressing this question, there is no need to go into thisquestion. Thus the one and only question that survives for ourconsideration is as regards the unaccounted investment in gold.5. A perusal of the assessment order in this regard showsthe explanation given by the assessee on the acquisition ofgold as one for the purpose of investment in Gold Bond Scheme,1993; hence, the source for acquisition of gold to be used forinvestment in the Gold Bond Scheme could not be enquired at allby the Revenue. The Assessing Authority, however, pointed outthat at the time of acquiring the gold, there was no suchscheme giving immunity and exemption from any enquiry either asregards the investment in gold or gold being invested in bonds.Thus the contention of the assessee that the source ofacquisition of gold not to be enquired into, was not accepted.Considering this, the contention of the assessee, particularlywith reference to the import of gold as one for the purpose ofinvestment in Gold Bonds, was rejected. The Assessing Officerpointed out that there was no nexus between the gold acquiredthrough the receipt of customs duty for import of gold found atthe time of search and acquisition of Gold Bonds under the GoldBond Scheme, 1993. Thus the assessment included a sum ofRs.43,06,458/- as per Section 69 of the Income Tax Act.Aggrieved by this, the assessee went on appeal before theIncome Tax Appellate Tribunal. 6. As regards the acquisition of gold, which was investedin Gold Bond Scheme, the Tribunal rejected the contention ofthe assessee that based on the Budget Speech of the FinanceMinister in Parliament on 29.2.1992, the assessee imported goldfrom abroad utilising the services of Shri.Mohammed Mustafa andShri.Abu Tahir. and held that the assessee could not sayanything about the names and addresses of those two persons,whose services were taken for import of gold into India; therelationship of the assessee with those persons, whether theywere partners of the assessee or employees or in what mannerthey were associated or connected with the assessee to goabroad and acquire gold from there. The Tribunal rejected theassessee's contention that at the time of search, except theexcess gold jewellery, there were no primary gold or gold inany other form, found by the search party and hence, theinvestment in Gold Bonds had to be correlated to the importedgold, as evidenced by the two receipts evidencing payment ofcustoms duty. The Tribunal pointed out that the assessee hadfailed to prove with cogent and acceptable evidence the nexusbetween the gold imported on 4th and 12th June, 1992 through twopersons, namely, Shri.Mohammed Mustafa and Shri.Abu Tahir andthe investment of the same imported gold in Gold Bonds. It isno doubt true that the search party did not seize the Gold BondCertificates, which were found in the assessee's premisesduring search operation in view of the provisions contained inthe Gold Bond (Immunities & Exemptions) Act, 1993. However,the Tribunal pointed out that the assessee was called upon toexplain the source of amount invested by him in importing the https://hcservices.ecourts.gov.in/hcservices/ gold from foreign country. No explanation was offered asregards the acquisition of gold and as regards the moneyavailable with the assessee for importing gold through theabove-mentioned persons. In the absence of any satisfactoryexplanation linking the import of gold in the investment underGold Bond Scheme, which came long after the import of gold, theTribunal rejected the assessee's contention that based on thespeech of the Finance Minister made in the Parliament dated29.2.1992 relating to the year 1992-93, he imported gold. 7. Considering the fact that the Gold Bond Scheme pursuantto the Gold Bond Immunity Act was brought on the statute bookpursuant to the introduction of the bill in the Loksabha on23.2.1993, the Tribunal held that the assessee was not entitledto any immunity as spoken thereto in the said enactment. TheGold Bond Scheme was notified on 18.2.1993, which came intoforce from 15.3.1993 and the assessee tendered gold forinvestment in gold bonds in the last week of March, 1993.There was no reasonable and acceptable explanation from theassessee that it kept the imported gold for a period of ninemonths before investing in the Gold Bonds. The Tribunalfurther pointed out that the assessee was asked about thesource of money for sending two persons abroad and getting goldfrom foreign country; even before the Commissioner, in responseto the show cause notice, the assessee had not let in anyevidence to establish the nexus between the import of gold inJune, 1992 and the investment in the Gold Bonds in March, 1993.In the absence of any such convincing material to establish thenexus, the Tribunal upheld the order of assessment. Aggrievedby this, the assessee sought for reference before this Court. 8. Learned counsel appearing for the assessee placedreliance on the Budget Speech of the Finance Minister dated29.2.1992, wherein the Finance Minister pointed out to thesuggestions of the Members about the introduction of Gold Bond,which would help the Government in mobilizing the idle goldresources of ordinary citizens to supplement official reserves.Thus while proposing the Scheme under which citizens couldobtain a Gold Bond in return for gold, the Minister, in turnpointed out that as an additional incentive, the holders ofsuch bonds would not be asked any questions about the source ofgold holding and the Reserve Bank of India was preparing adetailed proposal along those lines. 9. Learned counsel appearing for the assessee relied onthe Budget speech of the Finance Minister as well as theScheme, which, under Section 4 of the Gold Bonds (Immunitiesand Exemptions) Act, 1993, granted immunity that no subscribershall be required to disclose the nature and source ofacquisition of the gold subscribed for the Gold Bonds includingthe source of money with which the gold was acquired andsubmitted that the Revenue was not justified in making theassessment. Further, he pointed out that no primary gold wasseized from the assessee, thus, there being no seized material,the charge for assessment under Chapter XIV-B of the Income Tax https://hcservices.ecourts.gov.in/hcservices/ Act itself is not there to sustain the assessment. In thelight of the above-said facts, the assessee seeks theassessment to be set aside as one without sanction of law.10. We do not agree with the submissions made by thelearned counsel appearing for the assessee, particularly, bythe facts found by the Tribunal in its order in paragraph 22.It is no doubt true that the investment in Gold Bond Schemeenables an assessee to gain immunity as per Section 4 of theGold Bonds (Immunities and Exemptions) Act, 1993. Gold Bonds(Immunities and Exemptions) Act, 1993 came into force on31.1.1993. It is not denied by the assessee that the import ofgold was made on 4th and 12th June, 1992 at a time when there wasno such Scheme. It is no doubt true that the Finance Ministerproposed a Scheme on Gold Bond investment in the course of hisBudget Speech on 29.2.1992 for the year 1992-93. Unless anduntil there is a definite enactment made, we do not think thatone could take advantage of the Minister's Speech to buttressthe argument that the import was made consequent on the speechmade by the Minister. Even though there is a reference in thespeech that the Reserve Bank of India was directed to formulateguidelines, the proposal being at a nascent stage and with nocertainty spoken thereto, it is difficult to visualise that theassessee had gone for import of gold for the purpose ofinvestment in Gold Bonds and gained immunity and exemption asspoken to under Section 4 of the Gold Bonds (Immunities andExemptions) Act, 1993. 11. It is no doubt true that all that was seized was onlyGold Jewellery from the premises of the assessee. Yet, asrightly pointed out by the Tribunal, there is hardly anyexplanation from the assessee as regards the import of goldusing the services of two persons about whom the assessee wasnot in a position to say anything. There is equally noexplanation as regards the keeping of the gold for the periodof nine months. Except for the Finance Minister's speech,which we do not think, would afford an acceptable ground fortreating the import as one for the purpose of investment inGold Bond, the contention of the assessee based on a possibleenactment to come to act, as an inducement of import, is a veryweak one for any judicial acceptance. As pointed out by theTribunal, the Section was notified on 18.2.1993 and came intoforce from 15.3.1993. The Act made on 2nd April, 1993 wasbrought into statute effective from 31.1.1993. Thus, whenthere is no convincing explanation linking the import of goldto the investment in Gold Bond under the Scheme, which itselfwas notified long after the import, we fail to understand howthe assessee could possibly plead protection under the said Actbased on the Budget Speech of the Finance Minister. 12. In the circumstances, there being no satisfactoryexplanation, rightly, the Tribunal rejected the assessee's pleaand upheld the assessment. Being pure question of fact, we donot find any justifiable ground made to accept the assessee'splea. We also do not find that the Budget Speech dated https://hcservices.ecourts.gov.in/hcservices/

29.2.1992 relating to the year 1992-93 would offer anyassistance to the assessee that the import of gold was linkedonly to the proposed Scheme. Accordingly, the questions raisedare answered against the assessee and this Tax Case standsdismissed. No costs. Sd/ Deputy Registrar(W) /true copy/ Sub Asst.RegistrarslTo1.The Assistant Registrar, The Income Tax Appellante Tribunal "B" Bench, IIIrd Floor, Rajaji Bhavan, Besant Nagar, Chennai-90.(5 copies)2. The Assistant Commissioner of Income Tax, Circle I(1),Pondicherry.3.The Commissioner of Income Tax Tamil Nadu-V, Chennai-34.4.The Secretary Central Board of RevenueNew Delhi (3 copies)+1cc to Mr.N.Quadir Hoseyn, Advocate Sr 48458+1cc to Mr.T.S.Ravikumar, Advocate Sr 48477UG(CO)km/28.9.T.C.No.110 of 2006